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An understanding of the Survival of Private Enterprises, Fiscal Policy, Monetary Policy and other issues in 2019

iconDec 25, 2018 15:17

SMM12, 25 March: the three-day Central Economic work Conference ended on Friday. As an important annual meeting for economic review and outlook, the market is very concerned about the signals sent by the meeting. SMM grabs the core points here for the market to understand.

A prudent monetary policy should be relaxed and moderate, maintain reasonable and abundant liquidity, improve the transmission mechanism of monetary policy, increase the proportion of direct financing, and solve the problem that it is difficult and expensive for private enterprises and small and micro enterprises to raise funds.

2. Fiscal policy

A proactive fiscal policy should increase efficiency, implement larger tax cuts and fees, and greatly increase the scale of special local government bonds.

3. Stock market

It is necessary to deepen reform, create a standardized, transparent, open, dynamic, and resilient capital market, improve the quality of listed companies, improve the trading system, and guide more medium-and long-term funds to enter. Promote the establishment of Science and Technology Innovation Board in the Shanghai Stock Exchange and pilot registration system to land as soon as possible.

4. Property market

Build a long-term mechanism for the healthy development of the real estate market, adhere to the positioning of the house is used to live, not for speculation, because of the city policy, classified guidance, tamp the main responsibility of the city government, improve the housing market system and housing security system.

5. Urbanization

It is necessary to promote the development of urbanization, do a good job in the settlement of agricultural transfer population already employed in cities and towns, urge the implementation of the target of 100 million people settled in 2020, and improve the level of fine management in big cities.

6. private enterprise

Support the development of private enterprises, create a legal system environment, protect the personal safety and property safety of private entrepreneurs, maintain the development of private enterprises, create a legal system environment, and protect the personal safety and property safety of private entrepreneurs.

7. Reform of state-owned enterprises

We will reorganize and set up a number of state-owned capital investment companies, set up a number of state-owned capital operating companies, and actively promote the reform of mixed ownership.

The large-scale tax cuts and fees generally expected by the market have been reaffirmed at this meeting, which is good. Up to now, private enterprises need tax cuts and fees more than ever, not only are private entrepreneurs eagerly looking forward to them. Ordinary people are also eager to reduce value-added tax, it can be said that tax cuts and fees have been desired by the people.

The most direct manifestation of the effect of tax cuts this year is that the national general public budget revenue fell in October and November compared with the same period last year. It should not be a problem that the general fiscal revenue for the whole of this year is higher than that of last year, but the increase should be less than that of last year. On September 27th, Finance Minister Liu Kun said that the scale of tax cuts and fees this year will exceed 1.3 trillion, 1.3 trillion, which is about a month's fiscal revenue of the government, accounting for less than 10% of the total revenue of more than 10 trillion. Coupled with the late landing of tax cuts, the feeling of sharing them across the country is not obvious, so tax cuts and fees have to continue, even if the fiscal deficit is increased, so that private enterprises and ordinary people will get real benefits. Earlier, Xiao Lisheng, director of the Academy of Social Sciences, said that the scale of tax cuts next year will be more than 1.5 trillion, including value-added tax, import and export tax, enterprise income tax and so on.

The picture shows the general revenue for 2016-2018.

So far, the big problem in China's economy is that the efficiency is too low, which is the main reason why enterprises can not earn money, workers' wages are low and effective demand is insufficient. After the economic crisis, in order to expand consumption, the government launched a urbanization movement, allowing farmers to spend in cities, consumption power is insufficient and the government forced to raise the minimum wage, put a lot of pressure on enterprises, many enterprises are already overwhelmed. At the same time, taking advantage of China's high savings, the government began to allocate resources beyond the top of the market, issuing banknotes to increase investment, pushing up M2, and at the same time allowing house prices to soar. In fact, the government has intervened too much in the market. Government intervention has not made the market more effective. The present overcapacity is a good example, but the government is also aware of this problem. Therefore, it was proposed at the third Plenary session of the 18th CPC Central Committee: let the market play a decisive role in the allocation of resources.

Since the beginning of this year, with financial deleveraging and the United States raising interest rates frantically, China's monetary policy has not been substantially tightened, but has been cut three times this year, releasing $4 trillion in liquidity, including 2.3 trillion of MLF,. However, the stock market still cannot rise, which means that real enterprises have not improved, that is to say, loose monetary policy cannot solve the current structural problems, and loose money cannot effectively transition to loose credit, but money has to be loosened. Monetary easing is simply to provide an appropriate financing environment for companies to revitalize. Earlier, Ren Zeping of Evergrande Research Institute suggested that interest rates should be cut no less than four times next year. According to the current situation, the number of interest rate cuts next year should not be lower than the three this year.

Let's talk about state-owned enterprises and private enterprises. Earlier, President Xi mentioned the issue of the reform of state-owned enterprises and suggested that state-owned enterprises should be stronger, better and bigger. As a result, there have been a lot of ridiculous remarks this year, such as the theory of the exit of private enterprises. On November 1, President Xi stressed that private entrepreneurs were our own people and then gave private enterprises a reassurance. With regard to the importance of private enterprises, President Xi has said that private enterprises have created more than 50 per cent of taxes, more than 60 per cent of technological innovations in GDP,70% and more than 80 per cent of jobs. It can be said that China's development is inseparable from private enterprises, private enterprises have a future, China's economy has hope.

Economy
fiscal policy
monetary policy
private enterprises

For queries, please contact Michael Jiang at michaeljiang@smm.cn

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